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Twin Contract Wins for Embraer

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Embraer S.A. (ERJ - Free Report) has entered into an agreement with Irish aircraft lessor, Aldus Aviation Limited, to sell 20 E-Jets, 5 EMBRAER 175 jets and 15 EMBRAER 190 jets. The contract also entitles Aldus to buy 15 models from the E-Jet family in the future.

The total contract value, expected to reach $1.56 billion, was already included in the fourth quarter 2012 backlog of Embraer, standing at $12.5 billion. The deal is expected to help Embraer set up its business in new areas along with increasing client base in Europe, Middle East, Australasia and Central and South America through Aldus.

In a separate press release, the company announced that it has been chosen by the Brazilian Air Force (FAB) for the renovation of its surveillance aircraft, nicknamed E-99. The contract, estimated at $215 million, will be executed through an Embraer Defense and Security subsidiary, Atech. The contract also includes the training and improvement of crews through setting up of six mission planning and analysis stations.

Both the deals are expected to strengthen Embraer’s position globally. The company currently operates in more than 43 countries through 63 airlines. The E-Jet models of the company are exploited in a number of ways like network carriers, low cost and regional airlines as well as charter operators.

In spite of the contract wins, the stock currently has a Zacks Underperform recommendation on the stock. It is also apprehended that the company’s earnings will miss the Zacks Consensus Estimate of 82 cents per share, with the Earnings ESP standing at -9.76%. Embraer bears a Zacks Rank #5 (Strong Sell). The company’s major competitor Erickson Air Crane holds a Zacks Rank #1 (Strong Buy).

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